Principles of Consumer Protection on House Ownership Credit

Friday, April 1, 2016

Indonesia - The Bank plays a very important and crucial role in providing House Ownership Credit (KPR) facilities. The high demand for housing financing makes this facilities become an interesting business opportunity. Therefore, many banks are competing to provide the credit to the public. On the other hand, public complaints related to the problem of the property industry and banking institutions have always been included in the top three complaints recorded in the Indonesian Consumers Foundation (YLKI) for the past three years.

The supervision and law enforcement carried out by the government, both the Financial Service Authority (OJK), the Ministry of Public of Works and Housing (KEMENPUPR), as well as Indonesian Central Bank related to housing financing through the credit are still lack. Consequently, the consumers being in a weak bargaining position when problems occur with banks and developers. The Cooperation Agreement made by the bank and developer as part of the risk management of KPR distribution is not optimal in protecting the interests of consumers. The agreement tend to more protecting the banks from the risk of developers who have problems in development or failure build, while on the other hand, consumers do not get a clear return of rights if the risk occurs. Regarding the marketing process and KPR offerings, YLKI found that bank marketing staff had not provided sufficient information regarding product profiles and agreement details, especially with important clauses regarding the legal impact that might arise from the agreement. On the other hand, the understanding of consumers related to financial literacy and financing risk is lack, because in general, consumers are not pro-active in asking important matters listed in the credit agreement.